Speculators Dominate Oil Futures

The headlines pretty much says it all, and the details are in a Washington Post story. Here are a few points to consider:

• At one time, commodity futures trading was limited to the big companies that used the goods to keep them from becoming another economic tool of wealth collection that would leave the public holding the bag of outrageously high prices.


• At one point in July, one comapny alone, Vitol, held 11 percent of all oil contracts on the New York Mercantile Exchange (NYMEX). All that control could have cost as little as a billion in cash, with the rest borrowed.


• Financial firms speculating for themselves or clients account for 81 percent of all oil contracts on the NYMEX. Their holdings have risen from $13 billion in 2003 to $260 billion this year.


• The drive to end regulation, no matter what the reason for having it, has let companies create unregulated trading exchanges, meaning that no one knows what's going on and, should things fail, it would be like setting off a match in a powder keg. (That's my view, not the Post's.)


• Yet another new exchange is opening up - in Dubai - and US oil contracts will be traded without supervision.

And people wonder why they have to go into hock to fill an auto or heating oil tank.